About the Author

Story highlights

If Paul Krugman can be misled by budget reporting, does anyone really believe that a typical reader is being accurately informed?

Doing policy work in Washington, I tend to be around people who are highly educated and think of themselves as very intelligent. Many of them think of ordinary Americans as being stupid and ill-informed. After all, they understand little about politics and the government; in their view this reflects a lack of intelligence.

It would be great if everyone were smarter (especially the people doing policy work), but the problem of an ill-informed population has at least as much to do with the failures of the highly educated people as the failures of the masses. Nowhere is this more obviously the case than with the federal budget.

Public opinion surveys consistently show the public is terribly confused about the budget. They hugely overestimate relatively small areas of spending, failing to recognise that popular programs like Social Security, Medicare, and Medicaid account for the largest portion of the budget, along with military spending.

For example, a 2011 CNN poll found that the typical person thought foreign aid accounted for 10 percent of the budget. The actual number is less than 1 percent. They thought public broadcasting accounted for 5 percent of the budget. The actual number is 0.012 percent. There were several other items where the typical person overestimated spending levels by a factor of 100 or more.

Rather than laughing at the stupidity of the average American it might be helpful to ask why such misperceptions exist. One obvious answer is that the media almost never reports the budgets for these programs in relation to the overall budget.

Blame the media

When a typical person hears that the government spends $445m a year on the Corporation for Public Broadcasting, they are likely to think that this is a lot of money, since it is way more than most people will ever see in their lifetime. Almost no one has their nose in the budget books, so they are not able to recognise that this sum is just a bit more than one-hundredth of one percent of the budget.

The same is true for other categories of government spending. People hear huge numbers and think that programs involve lots of money, because to them these sums would be lots of money. They are not in a position to assess the importance of a program to the federal budget.

This raises the obvious question: Why don't reporters express spending as a share of the total budget? Most people understand percentages. If they heard a reporter say the appropriation for the Corporation for Public Broadcasting was just over 0.01 percent of federal spending, they would know that this is not a very big item in the budget.

If Paul Krugman can be misled by budget reporting, does anyone really believe that a typical reader is being accurately informed?

The same would be true for other categories of spending. Would the Republicans spend as much time pushing their plan to cut food stamps by $4b a year if everyone knew that this was just 0.1 percent of the federal budget because it was reported as 0.1 percent of the federal budget every time it was discussed?

Or to take a slightly older example, when he ran for president in 2008, John McCain repeatedly highlighted as an example of government waste a federal appropriation of $1m to construct a museum for the Woodstock music festival. Would this museum have made as good a political prop if news accounts always referred to the sum as 0.00003 percent of federal spending? Whatever one thinks of the museum, no one should have been misled into believing that this expenditure was even close to being an important item in the federal budget.

The absurdity of the current method of reporting budget numbers is that everyone knows it is awful. No reporter thinks that most of their readers understand the huge budget numbers that appear in news articles, especially when it is often not even clear the number of years involved. In fact, the budget reporters even managed to fool Nobel Prize-winning economist Paul Krugman about the size of the Republicans' proposed cut to food stamps by not making it clear that the number was for 10 years and not one year. If Paul Krugman can be misled by budget reporting, does anyone really believe that a typical reader is being accurately informed?

There is no excuse for not expressing budget items as a share of the total budget in every article where they are discussed. The purpose of the news media is to inform, and it is not accomplishing this purpose now. This is a shift that requires zero money or training. (The Center for Economic and Policy Research has a budget calculator that allows the calculation to be done in seconds.) There is no one employed as a reporter at a major news outlet who would have any trouble using percentages in their pieces, if this was the standard.

So the story is really simple: the public confusion stems from incredibly incompetent budget reporting. The masses may or may not be stupid, but when it comes to knowing the relative importance of different items in the budget, the finger of blame should be pointed at the people who think they are smart.

Dean Baker is a US macroeconomist and co-founder of the Centre for Economic and Policy Research.

Content on this website is for general information purposes only. Your comments
are provided by your own free will and you take sole responsibility for any direct
or indirect liability. You hereby provide us with an irrevocable, unlimited, and
global license for no consideration to use, reuse, delete or publish comments, in
accordance with Community Rules & Guidelines and Terms and Conditions.